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Gst on maintenance charges by developer/builder

05 June 2018

Dear All,

1. If developer/builder as part of joint development agreement collects maintenance charges as part of corpus fund, sinking fund, charges for club house equipment from the land owner for the owners constructed area, before formation of RWA/Housing society, Can he charges GST @ 18% on those charges?

2. Further can the limit of Rs.5000(increased to 7500) per member per month applies to those maintenance charges collected by builder/developer before formation of RWA/Housing society.

Please help as there is no specific provision in relation to same.

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9 Replies

Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 05 June 2018

GST is payable on the owner's share of the flats/houses/portion of the building constructed by the builder/developer and given to the land owner as per the development agreement ,& As per me any such maintenance charges will be included in the construction cost , so the GST will be applicable

Yes maintenance charges per Member is 7500/- (As Notification number 2/2018- Central Tax (Rate)

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Maruthi Reddy (16 Points)
Replied 05 June 2018

But in Notification it is mentioned that limit of Rs.7500 is available in payments to RWA/Housing Society. But what about while making payments to Developer/Builder before formation of RWA/Housing Society

Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 05 June 2018

but as you mention in your query that maintenance is being collected from land owner, as it wil be added advance for construction cost for flat (which usuall developer chargd) , in that case gst is applicable

Maruthi Reddy (16 Points)
Replied 05 June 2018

But, here are those are being collected by Developer after issuance of Occupancy certificate but beofre formation of RWA/Housing society

Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 06 June 2018

Yes ... thats what iam saying that anything advance reced. during construction or before completion certificate,.. is Taxable , the GST has to charge by builder

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Maruthi Reddy (16 Points)
Replied 06 June 2018

But here those are being charged by Developer AFTER issue of Occupancy Certificate, BEFORE formation of RWA/Housing society.

Vinod Babu (24196 Points)
Replied 06 June 2018

Yes agree with everybody's views

ABHISHEK GUPTA (MANAGER-TAXATION) (187 Points)
Replied 18 February 2019

Further to clarify that if one member pay below 7500 and 2nd member pay above 7500 whether GST is applicable to 1st member who pay below 7500.

Tshering Lama (2 Points)
Replied 18 December 2022

I concur with the query and point Mr Reddy is trying to make. I feel that the developer/builder should hasten to help the residents form the RWA so that the burden of GST on the flat owners for maintenance is removed at the earliest.

But until such time as the RWA is formed, the developer/builder is the de-facto RWA and the flat owner after completion and possession of the flat should not be burdened with extra GST unless the delaying of the formation of the RWA is to builder's benefit, i.e is the GST taken from flat owners being chaneled to government? or is it siphoned elsewhere? there needs to be a clear transparency of GST paid by builder to government.